Everybody loves a good gift. So what better to give your loved ones than an asset which not only multiplies in value over time but also provides a sense of financial security. Yes, we are talking about immovable property like land and buildings that can be passed on to your kin through a simple gift deed. While movable property can simply be transferred from one person to another, for immovable property, there is a legally mandated procedure that needs to be followed for it to be valid.
What Is A Gift Deed?
A gift deed is a document that signifies, as the name itself suggests, the gifting of a property from a donor (the person gifting the property) to a donee (the person receiving the gift). A gift deed, of course, is a legal document and therefore carries with it certain liabilities and procedures that need to be catered to ensure that it is valid in the eyes of the law.
The main statutes governing such passing on of property is the Transfer of Property Act, 1882 and the Registration Act, 1908.
Since both these statutes are central acts, the procedure regarding such gifting remains the same throughout the country (with the exception of Jammu and Kashmir), but the nuances regarding such procedures vary considerable across the 29 states. The variation mainly is found in the rates of taxation, stamp duty, etc which is determined by the concerned state. The reason for this variation can be identified in the fact that each state’s property value changes considerably as it is subject to various factors that affect it and setting a uniform rate to be paid across the country would cause considerable losses to the states, in terms of revenue collected from such transfers.
How Is A Gift Deed Different From Other Deeds?
Property, in India, can be transferred through sale deeds, gift deeds or will deeds.
- A sale deed is a typical contract wherein a person offers a due consideration, a price and then there is a sale of the property. The price that is paid during the sale is subject to taxation. This kind of transaction falls under the purview of the Indian Contracts Act, 1872; Transfer of Property Act and the Registration Act.
- A gift deed is where one person passes on the title of the property without a price due to the closeness of the relationship between the persons. Usually, gift deeds come into play when members of a family want to pass on the title of a property.
- A will deed is a document that is created by a person which governs the division of his/her property after his/her demise. It is a document that signifies the intention of the individual.
What Are The Prerequisites For Making A Gift Deed?
For a gift deed to be considered valid in law, there are certain prerequisites that need to be met. They are:
- The provision of the gift should be voluntary – When a donor decides to give a gift, it should be his/her own decision. If there is any element of coercion, misrepresentation or fraud involved, then the transfer would be considered null and void.
- There should be no consideration for the transfer – If there is a monetary consideration for the transfer, then it no longer remains a gift.
- There should be acceptance of the gift – The donee must accept the gift within the lifetime of the donor. If there is no acceptance then a gift deed cannot be created. This requirement finds its basis in the idea of having two parties for there to be a valid contract and the need for consensus ad idem (agreeing about the same thing in the same sense) for there to be a valid contract.
- The gift should be contemporary – For any transfer of property through a gift deed, the donor must have a title over the property, i.e., it needs to be a property that is currently in possession of the donor. It cannot be a property that the donor wishes to acquire in the future because he/she has no legal title over it.
- Other necessary requirements are that the donor should be of sound mind, he/she should not be a minor and he/she should not be incapacitated by any law in force which prevents him/her from entering into a contract.
What Are The Procedures Involved In Making A Gift Deed?
- The execution of the gift deed
The title of the property to be transferred must legally be in the name of the donor. The document which signifies the intention to create a gift deed must specify:
- The name of the donor, his/her father’s name and address.
- The name of the donee, his/her father’s name and address.
- The relationship between the donor and the donee.
- Legal specifications of the immovable property to be transferred which includes the correct address, plot size etc.
- Any other supplementary clause can be added in the gift deed. These clauses can be regarding conditions which would render the deed revocable (gift deed is not a revocable document unless conditions are mentioned), conditions to be fulfilled as per the expectation of the donor etc.
- Acceptance of the gift deed
The gift deed must be accepted by the donee for it to be valid and the acceptance of the same needs to be signed with two witnesses.
- Registration of the gift deed
Once all the procedural formalities are completed, there should be registration of the gift deed for the immovable property for it to acquire legality. The registration of the gift deed should be done at the sub-registrar’s office.
What Is The Stamp Duty For A Gift Deed?
Stamp duty is a tax levied on the legal recognition of certain documents. For gift deeds, the stamp duty is considerable lesser. In Madhya Pradesh, the stamp duty and registration fee to be paid for gift deeds is as follows:
|Relationship with the donor||Stamp duty|
|Family (which includes mother, father, wife, husband, son, daughter, brother, sister, granddaughter and grandson.)||1% of the market value of the property (not less than Rs. 1000).|
|Others||5% of the market value of the property.|
Transfer of Property Act, 1882 and The Registration Act, 1908 mandate than any passage of property title should be registered in the Sub-Registrar’s office for it to acquire legal validation.
Gift deed document needs to be signed by the donor and the donee and presented to the sub-registrar within 4 months of the ratification. If, due to unforeseeable circumstances, the document is not registered, it should be registered after that period after paying a penalty within eight months of the signing. Beyond this period, the document will not be accepted. After being registered, the document becomes a matter of public record and can be used in courts as evidence to settle legal disputes.
For the registration of the document, a fee needs to be paid to the sub-registrar which is between 0.5 to 1% of the market value of the property. The documents to be presented for the registration are a route map of the property, address and measurements of the property and address proof of the parties to the contract. If all these documents are presented and verified, the sub-registrar will carry out the registration process for the transfer.
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